Tensions reach boiling point as Greek PM speaks

Greek police have fired tear-gas at thousands of people rallying against government austerity measures in Thessaloniki while Prime Minister George Papandreou was promising to save his debt-stricken country from bankruptcy.

In his annual key speech on the economy, Papandreou said that his main concern was to keep the country solvent.

As he spoke, police fired tear-gas to disperse an angry crowd of protesters in Thessaloniki, Greece’s second largest city, where almost 25,000 people were rallying against government austerity measures.

The police have arrested two people while another two were injured in the clashes. Several taxi drivers had been throwing firecrackers, bottles and sticks at the police.­

The protests have been growing more intense as the head of the government prepares to deliver a major speech at the Thessaloniki Trade Fair. Greece’s prime minister has promised to meet ambitious fiscal targets for 2011 and save the debt-crippled country from bankruptcy. Papandreou has pledged to press on with vital reforms to improve fiscal discipline and secure continued payment of international rescue loans.

The rise of protests on Saturday was provoked by fears that Papandreou was going to announce a default, but government spokesman Elias Mosialos vowed these rumors were groundless. Greece’s finance minister, who is also the deputy prime minister, Evangelos Venizelos added that the wave of rumors of bankruptcy over the weekend was a set-up. “This is a bad game, pre-organized speculations, directed against the euro and the eurozone as a whole,” he said.

The protesters have threatened to block the center, saying they “demand democracy”. People have been gathering near the building where the PM is making his speech. Among them are trade union members, communists and “angry citizens” like taxi drivers, students and even football fans. Their actions are reported to be synchronized via the Internet.

Taxi drivers have called a 24-hour strike, and many Thessaloniki restaurant owners are protesting against a VAT increase on Saturday by closing their businesses.

In the course of riots on Saturday morning, a home-made explosive device went off in the center of Athens. The device was lacking in power and there were no injuries.

Papandreou’s government has angered the Greek people with the recent austerity measures, with salaries and pensions going down, while taxes and retirement ages going up.

The unpopular measures were imposed to secure vital international rescue loans worth $302.6 billion. Greece is now trying to save funds at the same time as trying to reviving a fast-contracting economy amid record unemployment. This has led to painful results, causing new market woes. The government has said it is going to stick to its austerity policy, doing everything possible to avoid bankruptcy and thus compromising the euro.

­“Autumn protests are typical for Greece”

­Despite the fact that this year more people are drawn into protests due to the country’s economic woes, autumn protests in Thessaloniki are typical for Greece, economy analyst Nick Skrekas told RT.

“It is usually the case this time of year, because the focus is very much on politics and the announcements in Thessaloniki,” he said. “Given this crisis and all of the austerity measures and much of the pain that the average person is feeling in Greece, there is more than enough disenchantment to have more people in the street this year.”

There are widespread speculations that the best option for Greece is to leave the euro, but in reality such things do not happen overnight, Skrekas added.

“I would agree with many that have criticized the fact that we are in the euro. It really has not benefited us all that much,” he said. “If you do not plan very well for such an exit from a currency union, you risk a crashing devaluation which could lead to hyperinflation. I think it is a discussion and debate that we need to have in Greece and it is something that we may actually need to plan for.”

­Anthony Wile, the founder and chief editor of thedailybell.com website, believes that whether Greece decides to leave the euro zone comes down to the people, who are getting frustrated and are no longer willing to take the shots being called by others from the outside.

“It is up to the Greek people to decide what austerity measures will be implemented,” he said. “They certainly don’t want to be taking orders from people sitting in Brussels and the IMF.”

He believes the eurozone as a whole is based upon a false premise that central planning works.

“The more you remove the power for decision-making away from the individual, the less effective the decision-making is and the more dysfunction you are going to have within your economy and within your political and social structures,” he said.